China’s Stocks Rebound From Steepest Weekly Decline in 20 Months

China’s stocks rebounded from the
biggest weekly drop in 20 months as oil refiners and brokerages
rose on improving earnings prospects, overshadowing a private
report showing the nation’s manufacturing may slow this month.

China Petroleum & Chemical Corp. (600028), also known as Sinopec,
rallied 2.7 percent after the government allowed refiners to
raise fuel prices for the first time since September. Citic
Securities Co. (600030) paced gains for brokerages as the Shanghai
Securities News reported regulators will expand short-selling.
China Vanke Co. and Poly Real Estate Group Co. slid more than 2
percent after the China Securities Journal reported detailed
rules to rein in the property market may be released soon.

The Shanghai Composite Index (SHCOMP) rose 0.5 percent to 2,325.82
at the close, paring a gain of as much as 1.1 percent after a
preliminary manufacturing report from HSBC Holdings Plc trailed
economists’ estimates. The gauge dropped 4.9 percent last week.
The CSI 300 Index (SHSZ300) added 0.3 percent to 2,604.96 today.

“Today’s gain is a technical rebound, helped by a couple
of large-caps such as Sinopec, which has risen because the
increase in fuel prices exceeds expectations,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai.
“The PMI data show the economic recovery is weak.”

Gasoline Prices

The Shanghai Composite has fallen 4.5 percent after gaining
as much as 24 percent during a bull-market rally that started on
Dec. 3. The measure’s valuation of 9.66 times projected 12-month
earnings is near the lowest in a month. The index is still up
2.5 percent this year.

The preliminary reading of a Purchasing Managers’ Index was
50.4 in February, according to a statement from HSBC and Markit
Economics. That compares with the 52.3 final reading for January
and the 52.2 median estimate of 11 analysts surveyed by
Bloomberg News. A number above 50 indicates expansion.

Chinese stocks may continue to fall in March because the
current economic recovery isn’t strong and investment growth may
decelerate, analysts led by Mao Changqing at Citic Securities
wrote in a report today.

Sinopec, the nation’s biggest refiner, rose 2.7 percent to
7.17 yuan. The stock was the biggest contributor to the Shanghai
Composite’s gains, according to data compiled by Bloomberg.

Gasoline will increase by 300 yuan ($48) a metric ton and
diesel by 290 yuan a ton effective today, the National
Development and Reform Commission said in a statement on its
website yesterday.

Eleven brokerages including Citic, Haitong and GF will be
able to borrow shares in a pre-approved pool of 90 publicly
traded companies, the Shanghai Securities News reported over the
weekend, citing China Securities Finance Corp. The state-owned
agency was set up to provide securities firms with funds and
stock for short-selling and margin trading.

There are expectations brokerages will continue to expand
and earnings are likely to rise this year from last year on
increased transactions, said Song Jian, an analyst at China
Minzu Securities Co., by phone today from Beijing.

Trading volumes in the Shanghai Composite were 32 percent
lower than the 30-day average today, according to Bloomberg
data. Thirty-day volatility in the gauge was at 19.4, close to
the highest since Jan. 28.

Some ministries and local governments may announce detailed
rules to control the property market soon, the China Securities
Journal reported today, citing an unidentified person. Some of
the measures will likely be announced before the National
People’s Congress and the Chinese People’s Political
Consultative Conference, according to the report. The CPPCC
meeting will start on March 3 and the NPC will begin on March 5.

Kweichow Moutai Co. (600519) and Wuliangye Yibin Co. led a retreat
for consumer-staples stocks after they were fined 449 million
yuan in total by local governments for setting minimum retail
prices. Moutai, which makes baijiu liquor, slid 2.4 percent to
181.09 yuan. Wuliangye lost 2.3 percent to 25.19 yuan.